REIT relief boosts property and helps FTSE to finish above 6,000

LONDON'S key index closed above the 6,000 mark yesterday for the first time since March 2001 as the City digested Chancellor Gordon Brown's tenth Budget. Property shares made the most running as the Chancellor overhauled his proposals for Real Estate Investment Trusts (REITs) so that developers wishing to convert to REIT status would have to pay a charge of just 2 per cent of the market value of the properties concerned compared with some estimates as high as 20 per cent.

It added more than 1.5 billion to the value of the UK's four largest property firms as shares in Land Securities surged 13 per cent, or 237p, to 2,080p, British Lan gained 12 per cent, or 138p, to 1,300p, Hammerson rose 9.2 per cent, or 110p, to 1,300p , and Liberty International also ticked up 85p to 1,225p. Slough Estates rose 13.4 per cent, or 81p, to 685p.

The FTSE 100 closed 16.2 points higher at 6,007.5, having fallen as far as 5,957.8 during the day. It had smashed through the landmark barrier several times since last Friday but yesterday was the first time it hung on to gains to close above 6000.

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Analysts said that investors were relieved that Gordon Brown's Budget contained no major shocks.

Edward Menashy, economist and strategist at Charles Stanley, said: "The markets have looked on this as a very bland and political Budget - all the measures were fairly neutral.

"A lot of people said he might try to increase taxation in the first year after the general election and give himself room to spend more money ahead of the next election ... but it did not contain any negative surprises."

Shares in British Energy traded higher after Brown also said that the government was prepared to sell part of its stake in the nuclear power generator. Shares closed 2.8 per cent, or 18p, higher at 650.5p.

The broader market took heart from the minutes of the Bank of England's last interest rate setting meeting, which showed its monetary policy committee was split eight to one for the fourth month running in March, as expected, with Stephen Nickell again wanting to cut rates from 4.5 per cent.

Elsewhere, takeover speculation bolstered the market, with ICI climbing 4.8 per cent, or 16.75p, to 363.5p to within a whisker of its four-year high on speculation that US rival DuPont might be considering a bid. Neither ICI nor DuPont were immediately available to comment.

At these levels, ICI would be worth 4.3 billion which even for DuPont could be expensive.

Broadcaster ITV gained more than 9 per cent, or 11p, to 128p after the company rejected an approach by private equity groups Apax, Blackstone Group and a subsidiary of Goldman Sachs to acquire a majority stake in the company.

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One trader said: "The stock's definitely in play, and the talk will be that there will be an improved bid."

Argos-stores owner GUS gained 3.4 per cent, or 37p, to 1,129p on talk that it had rejected a 7bn bid approach for its Experian credit rating division. GUS said it had no comment. Other sources also suggested that, because GUS is valued at around 9bn as a company, buy-out firms may also mull a bid for the entire group.

ScottishPower rose 3p to 587.5p as Citigroup opined that now the sale of PacifiCorp has been completed it would open the door for a potential bidder with Scottish & Southern as the most likely candidate. SSE dipped 8p to 1,136p.

DOW JONES 11,317.43 +81.96

US BLUE-chip stocks climbed yesterday as China's Shanghai Diesel Engine said that it was in talks to boost co-operation with Caterpillar, raising hopes that US companies can benefit from international expansion.

The Dow Jones industrial average closed up 81.96 points, or 0.73 per cent, at 11,317.43. The Standard & Poor's 500 index was up 7.81 points, or 0.6 per cent, at 1,305.04. The Nasdaq Composite index was up 9.12 points, or 0.4 per cent, at 2,303.35. Microsoft's delayed launch of its new operating system was a drag on the technology sector, putting a lid on the Nasdaq's gains. Apple, the maker of Macintosh personal computers, lost early gains despite standing to benefit from Microsoft's delay.

Shares were also boosted by the bond market as the yield on the benchmark ten-year US Treasury note dipped to 4.71 per cent from 4.72 per cent, possibly signalling lower interest rates ahead.